A new system for assessing whether or not the sick and disabled are capable of working has been proven to be flawed, and is wrongly finding seriously ill people ready to work, a document published today reveals.

People with advanced Parkinson's Disease or Multiple Sclerosis, with severe mental illness, or awaiting open heart surgery have been registered as fit to work, according to the report by the Citizens Advice Bureau.

The Employment and Support Allowance (ESA) was introduced in October 2008 to replace Incapacity Benefit. The reformed system was designed to give greater support to those deemed able to return to some form of work.

A revised fitness for work test was introduced at the same time for all new claimants, based on a principle of looking at what people can do rather than what they cannot do, but Citizens Advice found that the assessment has often been inaccurate and was not sufficiently sensitive to "the complexities of many illnesses and disabilities".

"People with serious illnesses and disabilities who could not reasonably be expected to work are being found fit for work," the report states.

"Many of these people are too ill to sign on, or are not eligible for any other benefit, and so are left with reduced incomes and no help or support to find work."

Between last October and December, 22,618 people consulted Citizens Advice offices about the ESA, the vast majority of them with concerns about the work capability assessment – the new system designed to appraise someone's potential to work. Advisers working for Citizens Advice have expressed "grave concern" about the number of people unexpectedly being found fit for work.

The charity is calling for a full review of the system, a rethink that would reassess who should be eligible for the benefit, and study the accuracy of the medical assessments.

Responding to the report, the Department for Work and Pensions said the medical assessment system was being adapted and changes would soon be announced that would make it more sensitive to the needs of cancer sufferers, people with learning disabilities and autism, and those with fluctuating conditions.

Part of the problem to date has been that closed questions on the medical assessment form do not allow people to describe their illnesses, but simply require yes or no responses about whether they are able to stand, or sit, or walk a certain distance.

The CAB's report highlights concern that not enough attention has been given to the impact of mental health issues on the ability to work, and warns that the new test does not properly recognise the effects of pain and exhaustion.

"Seriously ill and disabled people are being severely let down by the crude approach of the Work Capability Assessment. A much more sophisticated approach is needed, that not only looks at a person's ability to undertake a certain task on the day of the test, but considers supporting medical evidence and other aspects, such as the variability of a person's condition," David Harker, chief executive of Citizens Advice said.

"We are very concerned about the 69 per cent of people assessed who are refused ESA."

Under the new regime, seriously ill people are obliged to undergo the work capability assessments whereas under the old system, if a claimant was deemed to be critically unwell, information provided by their doctor would exempt them from an assessment.

The report cites the example of an engineer in his 50s who had recently undergone a triple bypass for heart disease and was being treated for incurable stomach and liver cancer, who was deemed fit for work. During his assessment he said that he walked daily (as part of his convalescence regime) and that he was able to raise his hands above his head; as a result he was registered ready to start looking for work.

Sue Royston, the author of the study, said that most disability organisations had been supportive of the changed system when it was first announced, welcoming the extra support it offered those who had some level of incapacity but who wanted to work. However, concerns began emerging once the changes were implemented.

"This is a systemic problem. Bureaux up and down the country are reporting that very seriously ill people are being found fit for work," she said.

Changes have so far only affected new claimants, but Yvette Cooper, work and pensions secretary, said the government would press ahead with next stage of reforming the Incapacity Benefit system and will next week announce plans to start retesting the more than two million people currently claiming the old Incapacity Benefit.

"In order to lift millions from a lifetime of benefit dependency, doctors will assess 10,000 long term sickness benefit claimants each week," a DWP statement announced.

In response to the CAB report, Jonathan Shaw, Minister for Disabled people, said: "We are already adapting the test and will continue to work with organisations like CAB to make sure their concerns are addressed. We want to be sure that the assessment fully takes into account all conditions, including autism and learning disabilities. To be clear, people who are about to undergo cancer treatment will be exempt from the assessment."